Question

A C corporation earns $4.50 per share before taxes. The corporate tax rate is 35%, the personal tax rate on dividends is 20%, and the personal tax rate on non-dividend income is 39%. What is the total amount of taxes paid if the company pays a $2.00 dividend?A) $2.48

B) $1.98
C) $0.90
D) $1.58

Answer 1

B) $1.98

Step-by-step explanation:

Corporate tax = $4.50×35%

= $1.575

Personal tax = $2.00×20%

= $0.40.

Total amount of taxes = Corporate tax + Personal tax

= $1.575 + $0.40

= $1.98

Therefore, The total amount of taxes paid if the company pays a $2.00 dividend is $1.98